Increased catastrophe losses driven by the past winter's severe weather helped drive down first quarter property and casualty insurers' profitability 39.8% to $13.9 billion, according to an A.M. Best Co. Inc. first quarter financial review of the sector issued Monday.

Increased first quarter catastrophe losses of $1.8 billion compared with $772 million during the same period last year dragged heavily on results, which Best blamed mainly on the winter's polar vortex, according to “Polar Vortex Chills Industry Profits; Policyholders' Surplus Still Rises.”

“Losses related to the polar vortex — which brought record and near-record cold temperatures across much of the northern United States and pushed snow and icing conditions into much of the South — account for much of this increase,” Best said in its report.

Underwriting continued to be profitable in the face of the increased catastrophe losses as the sector posted a first quarter combined ratio of 96.4% compared with 92.7% in the year-ago period. Net written premiums grew 2.7% to $122.6 million for the first quarter compared with growth of 4.6% during the first quarter of 2013.

“While companies continue to report increasing rates and exposures, the pace of that growth has dropped significantly,” Best said in the report.

After-tax return on equity fell to 2.1% for the quarter from 3.7% during first quarter 2013 while policyholders' surplus grew 9.8% to a record $671.8 billion at the end of the quarter, Best said.

Net investment income declined 15.2% to $11.2 billion from $13.2 billion in the year-ago period as “Persistently low interest rates continue to take a toll on the industry's investment returns,” said Best in the report.